How much money could taxpayers in Germany save in 2024?
With changing tax rates and increased child allowance, 2024 could see the tax burden reduced year for taxpayers in Germany - even with some contributions going up.
Many taxpayers in Germany will have several hundred more euros to spend in the coming year due to tax changes.
That's according to calculations by financial scientist Frank Hechtner from the University of Erlangen-Nuremberg who looked at the planned adjustments to taxes and social security contributions coming on January 1st 2024.
"The change in the income tax rate for 2024 will lead to significant relief," said Hechtner in an interview with German business newspaper, Handelsblatt.
For example, a single person with an income of €3,000 per month will have a total of €172 more at their disposal in 2024 compared to 2023, despite rising contributions.
READ ALSO: What you need to know about money and tax changes in 2024
A single person earning €5,000 per month will have €292 more left in their wallet over the year, according to the calculations.
The savings for a family with two children is significantly higher. If one partner earns €2,500 and the second €4,000 per month, the tax relief will be €508.
A family with two children where both parents earn €4,000 will have €620 left in their household budget next year.
Top-earning families with an income of €16,000 will have €1,600 more at their disposal.
The relief would be even greater if higher social security contributions were not a burden at the same time.
This is because a "not insignificant part" of the relief is "cancelled out again" by higher social security contributions, says Hechtner.
Child-free taxpayers are particularly affected by higher social security contributions. The additional burden in terms of social security contributions could amount to up to €722 for a single person in the coming year. A high-earning family will have to pay a peak of €541 more in social security contributions in 2024.
READ ALSO: What to know about Germany's long-term care insurance hikes
Hechtner says one reason for this hike is that the average additional contribution rate in statutory health insurance will rise from 1.6 to 1.7 percent for many people in 2024.
For high earners, the contribution assessment limits in the statutory social insurance schemes will also increase.
However, this will be offset by a series of tax relief measures next year. For instance, the basic tax-free allowance will rise from €10,908 to €11,604 euros. That means that people can earn up this amount without paying any tax.
Meanwhile, the child tax exemption (Kinderfreibetrag), which guarantees that parents’ income remains tax free up to a certain amount, is set to be increased from €6,024 to €6,384 in 2024.
READ ALSO: What benefits are you entitled to in Germany if you have children?
The federal government is also offsetting so-called cold progression by shifting the tax rates. This term refers to the effect that a wage increase to combat inflation causes someone to slide into a higher tax rate without their real income increasing.
For a more detailed analysis of how much you'll take home after salary deductions, try filling out the Stiftung-Warentest calculator.
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Many taxpayers in Germany will have several hundred more euros to spend in the coming year due to tax changes.
That's according to calculations by financial scientist Frank Hechtner from the University of Erlangen-Nuremberg who looked at the planned adjustments to taxes and social security contributions coming on January 1st 2024.
"The change in the income tax rate for 2024 will lead to significant relief," said Hechtner in an interview with German business newspaper, Handelsblatt.
For example, a single person with an income of €3,000 per month will have a total of €172 more at their disposal in 2024 compared to 2023, despite rising contributions.
READ ALSO: What you need to know about money and tax changes in 2024
A single person earning €5,000 per month will have €292 more left in their wallet over the year, according to the calculations.
The savings for a family with two children is significantly higher. If one partner earns €2,500 and the second €4,000 per month, the tax relief will be €508.
A family with two children where both parents earn €4,000 will have €620 left in their household budget next year.
Top-earning families with an income of €16,000 will have €1,600 more at their disposal.
The relief would be even greater if higher social security contributions were not a burden at the same time.
This is because a "not insignificant part" of the relief is "cancelled out again" by higher social security contributions, says Hechtner.
Child-free taxpayers are particularly affected by higher social security contributions. The additional burden in terms of social security contributions could amount to up to €722 for a single person in the coming year. A high-earning family will have to pay a peak of €541 more in social security contributions in 2024.
READ ALSO: What to know about Germany's long-term care insurance hikes
Hechtner says one reason for this hike is that the average additional contribution rate in statutory health insurance will rise from 1.6 to 1.7 percent for many people in 2024.
For high earners, the contribution assessment limits in the statutory social insurance schemes will also increase.
However, this will be offset by a series of tax relief measures next year. For instance, the basic tax-free allowance will rise from €10,908 to €11,604 euros. That means that people can earn up this amount without paying any tax.
Meanwhile, the child tax exemption (Kinderfreibetrag), which guarantees that parents’ income remains tax free up to a certain amount, is set to be increased from €6,024 to €6,384 in 2024.
READ ALSO: What benefits are you entitled to in Germany if you have children?
The federal government is also offsetting so-called cold progression by shifting the tax rates. This term refers to the effect that a wage increase to combat inflation causes someone to slide into a higher tax rate without their real income increasing.
For a more detailed analysis of how much you'll take home after salary deductions, try filling out the Stiftung-Warentest calculator.
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